Is it an opportune time to sell your business in the UAE?
SOURCE: Gulf Business
An acquisition is typically when a company or an individual purchases majority or all of the shares of another company, allowing the purchaser to gain control. An acquisition does not need to be the purchase of a company necessarily; it could also be the purchase of an individual asset or a group of assets.
Acquisitions are very common in businesses and occur most regularly among SMEs. Typically, the entire process is carried out between two parties; the seller and the buyer.
Due to the current situation globally, we have witnessed the pandemic significantly impacting economic stability. However, we can also see that startups and SMEs within the UAE have been impacted heavily, resulting in many businesses being liquidated.
Choosing to sell a business has many advantages such as allowing the seller to pursue other investment options, help pay off personal debts, or simply help exit an unsuccessful business.
Many businesses that cater to the service industry and rely on personal interactions with their clients have felt the brunt of COVID-19. Closing a company, however, can be an extremely stressful and expensive process where sellers are stuck with stocks or other assets after having cancelled their licence.
Selling a business in its entirety is far more beneficial financially to the seller. The process, however, is easier said than done. The difficulty of preparing a company profile, finding suitable buyers, valuating the business, negotiating, preparing legal documents, and signing contracts is a daunting and lengthy process. While the current situation may not benefit the seller vastly, it still allows an opportunity to recover partial investments that can be re-allocated to personal necessities.
On the other hand, when an individual or company chooses to acquire a business, there are several advantages such as when buying an existing business, all the startup work has already been completed and the business would have its plans and procedures in place. It also means immediate cash flows while the business would already be maintaining a financial history, giving the acquirer an idea of what to expect. Along with the business comes its customers, suppliers, contacts, goodwill, stock, and equipment.
During this time when several businesses and business assets are being sold, these buyers are faced with vast opportunities. Businesses and assets can be acquired at less than market value allowing the buyers to get more than what they pay for. The process however is no easier for the buyer than it is for the seller.
The UAE’s private sector is comprised of many startups and SMEs. Having said that, it is no surprise that over the past several months and due to the impact of COVID-19, the rate of businesses being liquidated is on the rise.
However, we can also determine from statistics shared by Dubai Economy that new company registrations are continuing at a steady rate.
Business owners in the UAE are looking for an exit for several reasons after having spent time and money in their businesses.
The liquidation process itself can cost a business owner anywhere between Dhs10,000 to Dhs20,000. It is hard enough for an owner to take the decision to liquidate and even harder to shell out more money to do so.
A clear gap in the market exists for professional yet affordable services to assist and accommodate business owners in selling their businesses. Once this gap is closed, the UAE will see a more stable market that will allow startups to grow into SMEs and SMEs to subsequently transition to bigger companies. It will also further help in providing more stability to the employment rate.
In conclusion, given the advantages of selling and buying a business while taking into consideration other aspects as well as the economic advantages, especially during the ongoing situation, it is important to understand, advise, and assist individuals and companies to make the most out of their investments.
The Lebanese startup ecosystem saw an increase of 18% in startup deals between 2018 and 2019, with 45 deals taking place. While the number of investments has gone up, the majority of these involve Early-Stage companies. Discover more details in our 2019 Lebanon Venture Investment Report.